Sasol to end its gas exploration near Bazaruto after robust pre-feasibility assessment
CAPE TOWN – Sasol's share price rose on Monday, increasing by up to 5.95 percent to R143.78 after it announced plans to withdraw from exploring for gas off the coast of Mozambique, close to the environmentally sensitive Bazaruto Island.
The chemicals and fuel-from-coal group recently attracted the ire of environmental groups and other regional stakeholders for its plans to explore for gas near the Bazaruto (Marine) National Park, which encompasses six tropical islands that include the largest population of dugongs along East Africa.
“Sasol will return Block 16/19 in its entirety to the government of Mozambique. To this end, a withdrawal notification has already been sent to relevant Mozambican authorities,” the firm said in a statement yesterday.
However, a JSE analyst, who wished to remain anonymous, said the rise in share price was not solely due to the gas announcement, but rather a combination of rising oil price, a recent stronger rand/dollar exchange rate, and progress by the group to sell assets, particularly in the US, so as to reduce Sasol’s $9.5 billion (R161.4bn) debt burden.
Sasol’s share price has been heavily traded by individual share traders since its sharp increase from only around R21 in March, following a global slump in oil prices that month.
The analyst said these traders tended to make the price more volatile to any form of news.
The Brent crude oil increased one percent in London to above $43 a barrel yesterday, the highest level since March, as Saudi Arabia hiked its selling prices, and in line with stronger global equity markets.
Sasol said the decision to exit the Mozambique exploration blocks, which it was awarded in 2005, had followed a “robust and transparent pre-feasibility assessment” that involved consultation with stakeholders from government to industry, such as tourism, fisheries, and to academia.
Sasol’s share price recovered from lows in March after it announced plans to mitigate the Covid-19 crisis and a lower oil price, and reduce debt by selling some of its assets and partnering, and possibly holding a rights issue up up to $2 billion.
Last week, Sasol said divestments were well under way on its equity interests in the Republic of Mozambique Pipeline Investment Company pipeline, and the Central Termica de Ressano Garcia gas-fired power plant in Mozambique.
Sasol was also selling an indirect interest in the Escravos gas-to-liquid plant in Nigeria to Chevron, while partnering was under way in the Base Chemicals assets in the US.
Sasol owns 50 percent of the Rompco pipeline that transports gas from gas fields in southern Mozambique, to Secunda, South Africa. The other shareholders are state-owned Companhia Moçambicana de Gasoduto (25 percent) and South African Gas Development Company (25 percent), a subsidiary of the state-owned Central Energy Fund.
One industry source told Business Report South African state-owned fuel authorities were keen to acquire more control of the pipeline as part of a wider ambition to combine all South Africa's state-owned energy assets into one national fuel energy company, which would become the biggest in Africa, and to also expand the gas infrastructure network in the country.
Sasol shares closed 3.97 percent higher at R141.10 on the JSE on Monday.